PRIVATE LABEL AT CHAINS SAID LIKELY TO GROW

PALM SPRINGS, Calif. -- The big private label programs at big chains are liable to get bigger and more important in 1995, according to Mark Husson, vice president, J.P. Morgan Securities, New York.Husson, formerly a U.K. retailer and now retail analyst, spoke about the status of supermarket private brand programs, and where some are likely to be headed, during a conference called Retailer Brand Realities,

PALM SPRINGS, Calif. -- The big private label programs at big chains are liable to get bigger and more important in 1995, according to Mark Husson, vice president, J.P. Morgan Securities, New York.

Husson, formerly a U.K. retailer and now retail analyst, spoke about the status of supermarket private brand programs, and where some are likely to be headed, during a conference called Retailer Brand Realities, held here and hosted by the Institute for International Research, New York.

An unabashed store brand advocate, Husson labeled as "a joke" recent proclamations by some national brand suppliers and industry pundits that 1995 will be the "year of the brand." It's a mistake, he said, to think that, because the economy is approaching a better footing, "consumers will pay 20% extra for a national brand once they've been weaned on a perfectly acceptable and extremely cheap private brand alternative."

By Husson's estimation, leading supermarket chains are betting consumers won't bounce back to national brands this year, and will instead continue to lean toward the European model of placing greater emphasis on private label to boost gross margins, especially for operators of larger stores.

He presented findings from a survey of U.S. chains with high private brand penetration. "The gains in the last few years in private brand sales are very heavily weighted with the top 15 chains, and the rest is due to Wal-Mart," he said. "If you include perishables, then it is fair to say that several have private brand sales over 50%."

He discussed the status of programs at individual chains.

Albertson's, he said, took stock this year in its private brand strategy and is committed to a far more aggressive program.

With private label penetration of 18%, American Stores, he said "is an odd jumble of businesses, a company with annual sales of $18.5 billion dollars being traded more like four or five separate $4 billion companies. He said American Stores will move toward more central corporate buying, with private brand the best opportunity for using "that $18 billion muscle."

Husson said American Stores' reliance on the President's Choice brand is a stop-gap measure to make up for the lack of a cohesive private brand program.

"The recent 10-SKU Cott program of soft drinks under the American Premier label goes somewhere toward starting to solve this strategic dilemma. I expect American Stores as a group to continue to pull such private brand rabbits out of their hat." Husson also said Kroger is moving more toward central buying and shipping. "A few private brand suppliers are about to get new and huge contracts, albeit with lower margins; while some smaller suppliers are likely to lose them."

The analyst mentioned Safeway and Vons Cos. together because of Safeway's ownership stake in Vons and the fact that Safeway's successful Safeway Select premium program is an apparent influence on the Vons Select line.

"While Safeway's private brand has only 2% penetration on the Select side, it has had a huge impact on the shelf in many categories."

The Vons Select program grew rapidly from 31 to 87 SKUs since its start in mid-1994, with fourth quarter penetration of 15%. "We believe this could be on average 18.5% during 1995, with corresponding gross margin advantages," Husson said. The chain is targeting 20% penetration by the end of 1995.